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More retailers on critical list

The rate of retail failures is expected to rise sharply in 2009, as the number of businesses in distress soared at the end of last year.

According to a survey by restructuring specialist Begbies Traynor, the number of retailers on its critical list rose 81% in the final quarter of last year, compared to the same period the previous year.

The survey shows a 245% increase in the total number of distressed companies last year, compared to 2007.

The survey says that 5,651 retailers faced “critical” problems - county court judgments and winding up petition actions - in the fourth quarter of 2008, up from 3,104 in the same period last year.

Begbies Traynor partner Nick Hood said: “Our statistics reflect the savage effect of the collapse in consumer confidence and excessive discounting by major store chains. We expect the rate of retail failures to accelerate sharply through 2009 as sales continue to fall despite ongoing discounting and as the weakness of sterling drives up costs. This severe squeeze on retail profitability will force many more companies out of business, a situation exacerbated by the understandable reluctance of banks to commit additional funding to support struggling retailers.”

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